Supervision and Control

Principal Legislation

The Law of the Republic of Indonesia No 2/1992 (as amended from time to time) is the principal legislation for all life and non-life insurance activities.


The authority regulating the Indonesian insurance industry is the Insurance Bureau, a department within the Capital Markets and Financial Institutions Supervisory Agency (CMFISA), or in Bahasa Indonesia, Badan Pengawas Pasar Modal & Lembaga Keuangan (BAPEPAM). The Insurance Bureau has four departments – licensing, operations, financial analysis and audit.

The Federation of Indonesian Insurance Associations (FAPI) represents the interests of life and non-life insurance companies and within FAPI there are two separate associations:

  • Indonesia Life Insurance Association – Asosiasi Asuransi Jiwa Indonesia (AAJI)
  • General Insurance Association of Indonesia – Asosiasi Asuransi Umum Indonesia (AAUI).

Admitted / Non-admitted

Non-admitted insurance is not generally permitted in Indonesia because the law provides that insurance must be purchased from locally authorised insurers. In practice, however, the following insurances are some exceptions to the general prohibition on non-admitted placements as per advice from BAPEPAM:

  • marine cargo import insurance
  • personal insurances purchased via the internet
  • risks in respect of which BAPEPAM has granted permission for non-admitted placement (see Buyers below for full details).

Compulsory Classes

  • professional indemnity for insurance brokers
  • fund for road, rail, sea and air transport passengers – State Social Insurance Scheme
  • work injury (state scheme).

State Involvement

There are four state insurance companies.

Tariff Classes

There are no statutory tariffs in respect of line and pensions business. In the non-life market, there are no statutory tariffs other than those for earthquake.

Premium Taxes and Charges

A stamp duty of IDR 6,000 applies to all policies. There are no other charges or premium or policy taxes.

Policy Language

Bahasa Indonesia or English.

Non-Life Insurance Market

There were 87 insurers active in the non-life market in 2010, compared to 84 in 2009, 94 in 2007 and 101 in 2004. The market remains overcrowded and highly competitive.

Coinsurance has been a widespread practice in the market and applies to many large and medium-size accounts, but its use is reported to have been waning over the last few years. Coinsurance is used mainly for property, CAR/EAR, engineering, marine cargo and the very occasional large miscellaneous accident account. The panel of coinsurers can be extensive, with some participants having shares of as small as 5%. Coinsurance is usually, but not always, arranged by brokers: on occasions it may be arranged directly. Agents do not arrange coinsurance.

Reinsurance Market
Indonesia also has four private domestic reinsurance companies. The trend towards increased market retentions appears to have been gradually continuing in 2010 and 2011.
Distribution Channel
The distribution of individual life insurance products in Indonesia is led by the tied agency channel. Bancassurance is highly effective also in the individual market and relationships with leading banks with large branch networks are prized by life insurance companies. Group life business, in particular health insurance, is broker-led.
Natural Hazards

The Indonesian archipelago is one of the most active volcanic regions of the world. Tsunami is a major exposure in many coastal regions. The major exposures are in West Java and Jakarta, Bandung (central Java) and Surabaya.

Indonesia is not in the windstorm or typhoon belt and these perils are of little concern to underwriters, except for consequent flooding caused by monsoon rain. Jakarta is a port city built on alluvial lowland, and is therefore prone to flooding. At least 12 rivers flow through the city into the sea. An extensive drainage system, including canals, exists to prevent flooding but it is poorly maintained and often clogged. In January 2002 major floods occurred in central Jakarta.